The Startup Journey

How I Raised Funding - Priyanka Agarwal, Wishberry

2018-08-23T02:37:00.002-07:00

You have to be confident and shameless while crowdfunding. Priyanka Agarwal, Wishberry shares on how to succeed in crowd funding with Venture Intelligence in this interview. Priyanka also candidly shares how the team built Wishberry, raised funding from top angel investors like Rajan Anandan, on pivoting, and difficulties in raising capital for entrepreneurs operating in niche spaces not chased by VCs.

Q: What does Wishberry do?

Priyanka Agarwal: In its latest avatar, Wishberry has pivoted into crowd financing of low budget films (INR 1-5 Cr). We are essentially trying to create an internet platform for investment opportunities for HNIs in films including Marathi, Tamil, Kannada, or films targeting the global diaspora.

L-R: Co-founders Anshulika Dubey & Priyanka Agarwal, Wishberry

Given that you are building a marketplace, how did Wishberry solve the Chicken and Egg problem? Beyond the “all or nothing” model what did Wishberry do to pull in more artistes and investors?

First, you need to divide our business into 2 things - Wishberry.in, the crowdfunding platform and Wishberry Films which is our finance business where we syndicate capital for creative projects. With Wishberry.in, we began by on boarding artistes with a condition that the first 25% of the project funding required should be from their own inner circle (family, friends and network) - only then shall the unknown circle fund them. So we got them to get their inner network to sign up on the platform and fund the initial portion of the project. Through time this had a ripple effect and the artistes’ work got recognition beyond their own network. It helped the artist build credibility with investors who would continue to fund the artist going forward in the future.

In our seed round in 2015 we had raised funding from 44 investors, so we already had a catchment of HNIs who were ready to not only invest in Wishberry but also in our projects as well. Our investors became our customers for they got quick returns from investing in creative projects like films as against investing for 6-7 years in a startup. The IP also became valuable through time.

In case of the Wishberry Films, we are doing it offline as we want build credibility before launching it online. We are curating a few films and pitching them to HNIs offline. Apart from being just a financial service, Wishberry Films will also look into the production, distribution, and marketing of the film so that we can control cost and quality. We can ensure that the film sees maximum revenue potential by cutting bloated budgets and maintaining transparency through all stages of the film’s life cycle. Successful examples of a few will help spread the word, get repeat backing and also assure new investors who are looking to get their feet wet in this asset class.

The company has been through pivots in its journey - has this been an issue with investors?

The company was incorporated in 2009. We launched the crowdfunding model in 2014 and the film financing launched in 2018. We saw these pivots as a natural progression of the company as we moved from funding for patronage to funding for profits.

In its crowdfunding avatar, Wishberry raised more than Rs. 12 Cr for 400 projects via 20,000 funders, but we realized that this model won’t work for every creative project, especially for longer formats like feature which need up to Rs. 3 Cr in funding. Also, given the content boom in the country with platforms like Netflix and Amazon coming in and offering further revenue opportunity for film content, we thought it was only natural to expand into film financing while continuing to offer crowdfunding services.

However, when we pitched to venture capital firms for Series A, they were conservative in investing in a company that had been through pivots. They were looking for a model which had been successfully implemented in other markets which wasn't true for us. We had only pivoted that year to film financing, and were looking to disrupt an industry which had been in existence for decades.

Given that we were also in industry which was highly dependent on relationships we quickly realized that we needed strategic and patient money. Strategic investors brought in experience and relations to the business, making it a perfect match.

How can one successfully raise capital through crowdfunding?

It is very important for artistes to estimate the target amount they need for their project and plan the exact budget breakdown as to how the money will be used. This clarity gives confidence to potential funders. Honest pitches always work. Crowdfunding is a full time job and we tell all our artistes that they will have to dedicate at least a couple of weeks to prepare for the campaign, shoot a pitch video, and to start talking to their inner circle. It's also very important to have uniqueness to your pitch which helps people connect with it and want to be a part of it. It's not just the idea but also how you pitch it.

At Wishberry, we have an in-house team of creative consultants who coach the artistes and guide them, but it is ultimately the artist’s own time and dedication that steers the ship. One advice that always works is - be confident and shameless while crowdfunding. If you need others to open up their wallets for your dream, you need to be confident enough to shout out from the rooftops about what your dream is all about.

During the fundraising campaign, you need to aggressively go after your network. It's not an easy job to do crowd funding. Apart from the 2-3 weeks of preparation you need 1-2 months to run your campaign.

How much of an issue has SEBI regulations on crowdfunding been for your company?

SEBI is still formulating regulations on crowdfunding, which is why we see crowdfunding platforms register in Singapore and syndicate investments offline. It is also one of the reasons why we are building the supply side of Wishberry Films offline. We expect some clarity on regulations in the next 18 months post which we shall be pushing the investing side of Wishberry films online.

In your seed round, you raised funding from the who’s who of Angel investors like Rajan Anandan, Sharad Sharma, Deep Kalra, Sunil Kalra, etc through the Letsventure platform. How did you kick off your fundraising process on Letsventure? How did you end up convincing so many stalwarts to invest in the company?

While raising money on an angel platform it’s extremely helpful to have a lead/anchor investor. Having said that, most of our lead investors were syndicated offline and we only listed on the platform to raise the remaining 20%. Having Rajan Anandan and Sharad Sharma as our lead investors convinced other angels to back Wishberry.

So how did you meet Rajan Anandan and Sharad Sharma?

My co-founder Anshulika and I are very extroverted and are very good networkers. We had met Vijay Anand of The Startup Centre at a Goa event, who had shared that Rajan Anandan would be at an event in Chennai. So we flew down to Chennai to meet Rajan at the event. We spoke for 10-15 minutes, as he asked us about our vision, why we were building Wishberry, etc. He decided in that 10-15 minutes if he wanted to engage further with us in investing. Typically Sharad Sharma and Rajan Anandan invest together. Sharad also believed in the marketplace and crowdfunding opportunity - they are investors in LetsVenture. For them, it was just the team that they had to validate and I think that’s what convinced them.

How much time did it take to close the angel round from first meeting to money in the bank?

Six months.

6 months! Why did it take so long even though you had investors like Rajan Anandan and Sharad Sharma as lead investors?

Well actually, we took one and a half months to pitch to investors, two weeks to sign the term sheet and a month to complete due diligence. The remaining three months were for just getting the paperwork done and coordinating with 44 investors to getting money in the bank.

Also for your seed round why didn’t you pitch for seed funding like Blume Ventures, India Quotient, Kae Capital etc?

I think we had reached out to Blume Ventures and a few other funds but I can’t seem to remember why it didn’t work out with them.

How many colleagues were involved in fundraising effort? How did you manage business and fundraising together?

During the seed round I focused in fund raising while Anshulika focused on the business. In Series A, both of us were focused on fundraising as it was going to be a harder sell pitching to strategic investors. We just doubled up on our time to getting both business and fundraising done. You just gotta do what you gotta do.

What tips would you share with women entrepreneurs for fundraising?

I would ask them not to sell themselves short as the ability to execute doesn’t depend on your gender.

People tend to reach out to peers to get support from for networking, business, guidance etc. Are there any women focused organizations and networks you would like to give a shout out to?

Why should it be any different for women? That just increases the notion of sexism. Go to the same people male entrepreneurs reach out to. Reach out to persons who are relevant to your business and ask them for advice or business. If they are sexist, move on and ask the next person. Don’t reach out just because organizations or people are more friendly to women - that is not the way to think about it.

What are your thoughts on the Saha Fund? Did you pitch to them?

No, we did not pitch to them. At the time of the seed round, they were not around and for our Series A round, we decided we wanted strategic money.

3 years later after your first angel round, you raised a bridge round? Was it a miscalculation of the runway?

No, it was the pivot of the business.

How did you plan your Series A funding?

We had planned to raise our Series A around 2017 and we successfully signed the term sheet in the same year. Paperwork and closing the round with a strategic investor took a little longer. It took us about 9 months from first pitch to money in the bank.

We spoke to 5 venture capital investors and quickly realized that financial investors were very uncomfortable in investing in us. So we reached out to about 5 strategic investors including Reliance Entertainment. We quickly found the right investors, but closing the round took much longer.

How were you introduced to Reliance Big Entertainment?

The benefit of raising a seed fund from 44 investors was that we had the support of 44 investors and their network. We were looking for strategic money and there were only five to six such companies in India so we reached out to our existing investors to help connect us to relevant people in these companies. We were lucky with Reliance Big entertainment because a senior executive of Reliance ADAG had met Mohandas Pai at his son’s wedding and they ended up discussing about Wishberry. They happened to show interest in Wishberry and we connected with them post the wedding. We also talked to other similar companies as well which we connected through our investors.

What is Reliance Big bringing to the table? What is the expectation from Reliance?

Well obviously, Reliance hopes we do very well in financially backing films. We are hoping they can share their expertise in evaluating budgets, scripts, distribute our films, talking to Netflix/Amazon, etc.

Raising funding from a strategic investor - does it limit the way Wishberry operates?

As long as the investor doesn’t hold 26% or more, they do not have much control over prospects of future funding or exits etc.

If the relationship is fruitful, why wouldn’t we want to work exclusively with Reliance? So it doesn’t limit us in any way and it’s also very important to have that discussion upfront of what is expected from each other.

What was the most quoted reason why investors said no?

Apart from the lack of a global model, not enough traction was a reason why they turned us down. Also as an industry, media and entertainment hasn’t seen much change, thus the skepticism.

What about global success like Kickstarter? Why didn’t it convince investors here?

Well, Kickstarter started off as a creative project funding, but hardware and tech was a much bigger success for them. Even though Kickstarter has raised institutional funding, investors didn’t believe a company at that scale can be built in India, with the educational climate that exists in the country.

Can you share instances where you had to say no to an investor? Why?

When we were evaluating multiple production houses, we had walked away from one of them as they had a negative reputation with filmmakers - who are our primary clients.

Varatharajan M is Manager at Venture Intelligence, India's leading provider of data and analysis on private company transactions, valuations and financials in India.

If you are looking to raise Seed or Venture Capital funding - the VC Handbook is a great resource you can use to identify best funds to reach out to. It also has tons of gyan on how to raise capital.

Looking for more help? Varatha helps entrepreneurs identify the best Private Equity and Venture Capital funds to pitch to. If you are interested he can be reached at research@ventureintelligence.com

Stock images from Unsplash.com

How doing Outsized Partnerships led Karadi down the Wrong Path

2017-07-07T05:18:00.000-07:00

Business Line has a fascinating account of the travails faced by Chennai-based children's entertainment and education brand, Karadi Tales, in its search for strategic / financial partners.

Viswanath has been fire-fighting to keep afloat Karadi Tales (now a unit of Karadi Path), the company he and his wife Shobha founded in 1996. A distribution agreement with Times Music had landed them in court. And the merger with ACK Media (publishers of Amar Chitra Katha) and subsequent acquisition by Kishore Biyani’s Future Ventures didn’t pan out as expected.

...The partnership (with Times Music) turned sour when there was a change in leadership at Times Music...When Viswanath cited the exit clause and asked for the agreement to be nullified, his partner refused to oblige and instead took him to court, which issued a stay order. Viswanath and his team, despite founding Karadi Tales, could no longer use the brand. “It took us two years to get out of the case,” says Viswanath, who also had to face an arrest warrant. Meanwhile, the company bled and went into debt.

...Biyani’s Big Bazaar - the supermarket chain - was present across India and appeared an ideal vehicle to sell Karadi Tales audiobooks. It was heartening that Biyani had a vision for products such as Amar Chitra Katha and Karadi Tales. In an interview to a business daily, he had talked about using stories woven around mythology and culture to impart values to the young.But did the promoter’s vision trickle down to store managers and sales executives? “For those obsessed with turnover per square feet, Karadi Tales might not be priority when there are other faster-moving and higher-valued products on the shelf,” says Parasuram.

Realizing the futility of doing "outsized partnerships", Vishwanath is now rebuilding Karadi with the help of two Social Venture Capital firms (also called as Impact Investors): Pearson Affordable Learning Fund (part of the British publishing major Pearson) and Aavishkaar.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

WTP: A Very Important Business Abbreviation

2016-12-08T05:09:00.000-08:00

Did you know the most profitable car of sports car maker Porsche is actually its family friendly SUV Cayenne? Wait what! How? Enter building to Customer's Willingness to Pay (WTP).

In a FirstRound.com post Madhavan Ramanujam, Simon-Kucher & Partners, shares the story of Porsche's counter-intuitive move in the mid 1990s.

In the mid 1990s Porsche's annual sales were a third of what they’d been the decade earlier when it almost died. The company badly needed a turnaround.

So Porsche "designed the car around what customers needed, valued and were willing to pay for – in short, around its price. All the items customers weren’t willing to pay for, like Porsche’s famous six-speed racing transmission, were thrown out, even if their engineers loved them."

In contrast Fiat Chrysler, which was also looking for a hit, "focused its development process on engineering and design, settling on a price for the car at the very end. Market performance was a disaster. It performed so poorly it eventually forced the company to issue temporary layoffs. Even though Fiat Chrysler was six times larger than Porsche, the company failed to craft a hit. That’s because the company thought about product first and price last. "

“On the other hand, Porsche’s masterstroke was thinking about monetization long before product development for the SUV was in full speed, then designing a car with the value and features customers wanted the most, around a price that made sense. The result was total corporate alignment: Porsche knew it had a winner, and had the confidence to invest accordingly,” Ramanujam says.

So how to get product monetization right?

Have the Willingness-to-Pay talk early.

Talk about price early in the product development process and figure out the acceptable, expensive and prohibitive prices.
Investigate How You Charge As Much as What You Charge
Apart from the price you charge how to chose what are you monetising - pricing by no. of users, product pricing, performance pricing etc. What works for you? Ramanujam shares how Michelin executives revisited the company’s long-established monetization model to release a improved product.
Don’t settle for a one-size-fits-all solution.

“If it's in a fountain it's free, if you put it in a bottle it's $2, if you put gas in it’s $2.50, if you put in a minibar it's $5. It's the same water. Your customers are different. They have different needs, they have different values, and they have different WTP. The only way to cope with this is to embrace customer segmentation.”

Ramanujam gives a step by step guide on how companies' can get their pricing right, the pitfalls you can dodge, case studies etc. Click here to continue reading.

Argh! How do I get my content to go viral?

2016-09-28T06:34:00.002-07:00

Content marketing has been a great and effective way to acquire customers. One question that all entrepreneurs ask is how to create viral content. In this Ink Talk, Sattvik Mishra, Scoop Whoop shares his lessons and the thinking that drives stories at ScoopWhoop.

Reality - Not all content goes viral - "while we had some wins, most of them were duds" he recounts. Why do some content go viral?

While traditional media hasn't changed - newspapers, websites, apps are all just versions of what editors want readers to read, content consumption has changed. e.g. While newspapers decide what news to put up on what pages, social media feeds are deciding for consumers what to consume.

News is very subjective - for a millennial a Game of Thrones episode would be a huge thing, while there are people who don't follow it. To be relevant to your targeted audience - you need to listen to know what they are talking about and what they'd like to talk about.

The most important sauce to content - EMOTION - happiness, anger, surprise, fear just anything! - without creating that emotional connect, content doesn't go viral.

e.g. He talks about how ScoopWhoop covered Rupi Kaurs's response to Instagram for removing her photo:

The article questioned notions of patriarchy which evoked anger, disgust - and was read more than 9 Million times.

Only X can write for X - a 20 yr old can't write for 40 yr old nor the other way - which is why diversity in a team is very important.

Make news relatable - Here he share how ScoopWhoop made youngsters read about the budget:

He shares "you can make something as boring as the budget and make it as interesting as the budget if you make it more relatable."

This doesn't mean you could just use the above lessons and continue to make viral content - you need to change and evolve with your audience.

You can catch our content here.

How Indian Entrepreneurs can build for the Mass Indian User: Ankur Singla, Helpchat

2016-09-13T21:47:00.000-07:00

In a ET article, Ankur Singla, CEO of Helpchat shares where Indian Entrepreneurs are failing at building for Indian masses:

"My hypothesis is that most Indian entrepreneurs and product managers build products for people like themselves - elite and westernized Indians who think and speak in English. This is also why almost all Internet companies fight it out for the first 10-20 million internet users.

However, the honest truth of the Indian internet market is that to build a large Internet business, you need find a way to build for the 200 million common Indians."

How can Indian Entrepreneurs build for Indian masses ?

1. Go out, talk and relate to the COMMON MAN.

"One weekend, I took all product managers in our team to Church Street in Bengaluru and we spent four hours talking to security guards, waitresses and small business owners. You need to see their phones, their home screens and understand their behaviour. All of them mooch off the Starbucks internet; a guard uses Uber to pick up his family from railway station, a waitress wants news about her hometown and a business owner needs more content around jobs."

2. Stop Westernizing the product/service and Embrace the Indianess

"think about Maslow's hierarchy of mobile needs. Think about basic aspects of the phone - battery, data usage, phone space, balance on their phone."

He shares about Chinese company UC Browser - "most readers of ET would think that Chrome is a great mobile browser until they see how UC Browser has built a download manager, optimised for Facebook messages and reduced data usage (all features super important for the common Indian)."

Click here to read more.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

Making Indian Entrepreneurship More Desi

2016-08-26T05:37:00.002-07:00

Writing in Founding Fuel, Baba Prasad, CEO of Vivekin Group who teaches entrepreneurship in B-Schools, bemoans the fact that a lot of the students would like to emulate the founders of companies like Facebook and Amazon and do not even bring up names like Narayana Murthy of Infosys or Azim Premji of Wipro, leave alone like Laxmanrao Kirloskar or Jamsetji Tata. "So, if business models for Indian entrepreneurs are fashioned in the West, and business heroes are not Indian, the question comes up: What is Indian about the Indian entrepreneur?," he asks.

According to the article, the crux of an Indian Entrepreneur is:

1. Balancing profit-making with the burdens it is imposing on society and the benefits it can deliver to society

2. The entrepreneur is solving problems, that are not uniquely Indian, but the scale is Indian.

Contrasting the Western/Capitalist model and a not-too-practical Gandhian/Socialist model, the author provides Aravind Eye Hospital as a balanced template for the new Indian model:

Aravind Eye Hospital, established in 1976 in Tamil Nadu by the visionary Dr G. Venkataswamy (popularly called Dr V), is an excellent example of such blending. Over the last 40 years, it has performed millions of screening tests and hundreds of thousands of cataract surgeries. The unique business model draws on a for-fee model to fund its free services. The problem of eye care is not uniquely Indian, but the scale of the problem is definitely Indian. And Aravind Eye Hospital’s business model makes the solution for eye care a typically Indian blend of the Promethean and Gandhian models.

A characteristically Indian model would be one that alongside profit-making considers the burdens it is imposing on society and the benefits it can deliver to society. It is a tough ask, and it is individually negotiated with each entrepreneur finding his or her own balance through self-scrutiny is the one who will be truly free and capable of innovation.

Venture Intelligence is the leading provider of data and analysis on private company transactions, valuations and financials in India.

Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers.

Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

Lessons from Yahoo & Jabong Exits: Suvir Sujan of Nexus Ventures

2016-08-11T01:31:00.000-07:00

Extracts from Suvir's recent blog post on how entrepreneurs & investors should determine timing of a strategic sale.

1. People - There is fatigue or lack of passion at the founder or leadership level. Or it is hard to attract or retain key talent in the company. Or there is a strong disagreement amongst the various stakeholders on the way forward.

2. Approach - The approach to solving the problem is either not working or not scaling. Revenues cannot scale without scaling costs proportionately

3. Market - The market is either not large enough, or the competitive dynamics in the market puts pressure on current business model

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

8 Rules for building Great Products

2016-05-06T06:37:00.000-07:00

In a Medium blog, Mitchel Harper shares his thoughts on what makes great products.

1. BFBC - Build For your Best Customers

They bring you most revenue and are willing to pay for upgrades and newer products. Give a higher weight age for their feedback.

2. Solve Tier I Problems

Tier I - One of top 3 problems of potential customers. If you are solving a Tier I problem you will have the Customers' attention and budget spend. The rest are Vitamins - "nice to have fixed" problems.

3. Build 'simple to understand' products

Design is your most important feature. Every time the user experience is great, a startup's revenue grow like weed.

4. Make a cupcake

Most startups try to build the wedding cake (the big final product) on their first iteration instead of starting small with a cupcake, then turning it into a cake (based on customer feedback) and then finally into a wedding cake (again, based on customer feedback).

4. Prioritize Customer Feedback and make Themed releases

Instead of a sprinkle of small improvements, you will be making one big improvement which will be felt by more customers.

5. Outsource non-core activities

Startups have a better shot at winning when they are extremely focused on a single mission — and anything that gets in the way should be delegated. Necessary business processes that doesn’t differentiate you from your competition should be outsourced to an agency or third party provider.

6. Manage costs & runway

When you build anything new, it’s tempting to just think about the initial cost to build, source or manufacture the product. What trips most founders up, though, is the ongoing cost to sustain that product once it’s live. Great products takes years of iteration based on customer feedback to generate that kind of revenue, which of course needs to be funded from somewhere — either profits or investors.

7. Be ruthless in tracking metrics

Running a startup is like flying a plane. If you can’t read the instruments, even for a few minutes, the plane probably won’t be flying for much longer.

Venture Intelligence is the leading provider of data and analysis on private company transactions, valuations and financials in India.

Click Here to learn about Venture Intelligence products that help entrepreneurs reach out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

What is Great Design? - Illustrated in 3 Doodles

2016-05-05T22:52:00.000-07:00

In a Medium Blog, Julie Zhou, VP - Product Design at Facebook shares (pun intended) a few doodles on what is Great Design. She calls it as the congruence of high "Positive Utility" and lotsa "Customer/User Love"

The Ambition Hierarchy of Designers

Catch the 3rd Doodle here

We've been getting our hands dirty at trying to get well designed infographics on Venture Capital & Private Equity. You can catch the stories here

Venture Intelligence is the leading provider of data and analysis on private company transactions, valuations and financials in India.

Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

Stop Whining & Start Executing

2016-04-05T04:56:00.000-07:00

Gary Vaynerchuk's advise to Whiner-preneurs: "Bullshit entrepreneurs cry about the way they want it to be instead of reacting to the way it actually is." & "Nobody gives a f*ck about your feelings and you need to stop crying and adjust"

Click Here for the video

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

How to identify Rock Star employees?

2016-03-21T05:53:00.000-07:00

Sara Tavel compares "Good" employees with "Rock Star" employees (whom she calls as the Mitochondria of the company)

1. Both are good at their jobs

2. The difference being in the scale of adding value. For good employees, it is is linear (more pay or higher the hierarchy = more value), while rockstar employees - "they add value to the company beyond their job description and responsibilities. They ask and do what is best for the company"

The "founder’s job (is) to attract and retain mitochondria through all stages of a company. At the early stages, this rare group of individuals is the core of the company. As your startup scales, they are your leaders."

How do you spot them? - Do Value Interviews

"Don't just hire for competence, interview for values"

Typically the founding team should check if the candidate is going to be a match with the core values of the company. If you had a chart for that you'd want someone on the top right corner.

A quick 2x2 interpretation of Sara's post:

Sara has more ideas on what characteristics such employees have, how to notice them while hiring, compensation, etc. You can read it here.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

How to spec your tech project and hire a programmer

2016-03-17T05:03:00.000-07:00

Derek Sivers has a great step-by-step guide:

Go to the following sites to open an account at each: upwork.com, guru.com, freelancer.com

...You'll get many offers, but if they don't have your magic phrase at the top (“I AM REAL” or whatever), delete them. This is very hard to do, since you'll feel thrilled that so many people are offering to help, saying things like, “We have looked at your project and would be glad to complete it immediately,” but trust me and delete those. If they didn't read something marked as VERY IMPORTANT already, you don't want to work with them.

...Here's the real reason why you're stopping at a simple milestone: you're going to hire at least two different people to do this first step, expecting that one will go bad, one will be so-so, and one will be great. Yes it means you're paying multiple times for this first milestone, but it's worth it to find a good one.

Do You Know The "Speed" Type of Each Team Member?

2015-12-27T23:54:00.001-08:00

D. Shivakumar of Pepsico India has a nice presentation type summary in Founding Fuel from the book "Move Your Bus" by Ron Clark. The book classifies team members into high performers ("Runners" - who consistently go above and beyond what is required.), the dependables ("Joggers" who do their jobs well without pushing themselves), average workers ("Walkers" who just get pulled along) and deadweights ("Riders" - who put their feet up and slow down the whole enterprise).

Here from the slides are the characteristics of "Runners"...

Runners bring positive energy

Runners carry the load and provide momentum. They come early to work, never complain and bring a positive energy.

Runners go for excellence

Runners are driven by the goal of professional excellence and take pride in contributing to an entity that wants to be top notch. Their impetus to work hard isn’t led by personal accomplishments, but is more about the good of the organization as a whole.

and what Leaders need to do keep them inspired - because "Having a runner maintain speed is far more important for an organization than trying to get a rider to walk":

Allow runners to shine and hold the spotlight for them...

Keep a runner’s spirit high As a leader, don’t break the runner’s spirit. Let him be even when you see some slippages—he will bounce back. But challenge him. Runners need coaching in terms of working with slower colleagues and that frustrates them.

Debt as a Funding Option for Indian Startups

2015-11-24T03:31:00.001-08:00

From an article on the IIM-A CIIE blog based on the experience of Flick2know and Revive, two incubatee companies of CIIE which have recently raised debt fund for their ventures (both from SIDBI):

Typical private debt funders provide loans in the range of Rs.5-25 crore per transaction at an interest rate of 15-17%, while govt. and govt. supported institutions provide as low as Rs 1 crore per transaction with interest rates starting from 9% for startups...Siddharth, for example, recounts from his recent experience of raising debt from SIDBI. Initially, they were hesitant about considering Revive, given the non-generic business model even though they had a revenue model in place. Revive took almost 1.5 years to raise debt from SIDBI under a scheme which is co-supported by DST for MSMEs with an interest rate of 5% per annum, although earlier they were considering to go with the Credit Guarantee Scheme.

As far as the criteria of selection is concerned, Divir mentions that unlike equity funders which look for startups with high growth trajectory, debt funders often seek a business that has minimum risk and proven financial performance. Siddharth adds, “debt-fund providers tend to prefer the ones with considerable market traction.” At the very least, there will be intensive scrutiny of last the three years financials, fine detailing of the projected financial model, and statutory compliance checks...“Patience is the key,” says Divir. One has to be clear why the fund is being raised with a clear utilization plan, and once the process commences, one has to patiently cooperate with the funding agency through the long-drawn process that debt funding entails. One also has to be ready for the extensive documentation and reporting that must be done during the life of the debt fund raised. “Lastly, a startup should only raise what it requires in debt, not a penny more, not a penny less,” he concludes.

"Treat Complaints as Free Market Research"

2015-10-21T03:02:00.003-07:00

From the summary of a "10 Tips for Entrepreneurs" speech by AirAsia co-founder Tony Fernandes in Digital News Asia:

Don’t be scared of complaints
Complaints are actually free market research. Someone took the effort to write to you to tell you where things went wrong and how they should be improved. These are things that companies pay a lot of money for consultants to tell them that same thing.

So we treat every email preciously.

All About Acquisitions

2015-10-19T20:08:00.000-07:00

Cross posted from the Entrevista blog:

Jeff Seibert, a techie who founded one company while still a student at Stanford and sold it to Box and then founded and sold another company to Twitter (where he still works), describes - in this returning to campus talk (at Stanford eCorner) - "what went well and what didn't during the acquisition of his earlier startups by big-name technology companies, stressing the importance of culture fit, maintaining your team's trust throughout, and continued investment in growth after being acquired. Seibert also explains how an acquisition isn't always the best exit strategy for a promising startup.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

Sridhar Vembu on Competing with Companies Raising "Series QE" Funding

2015-09-28T23:05:00.002-07:00

From the article by the Zoho founder in Economic Times:

Another day , another hot tech company raises $500 million (or is it a billion?) in Series D, Series E -I propose we just call all of it Series QE, because that is where all the money comes from anyway , right?

..If you are in one of those hot companies burning cash, enjoy the ride as long as it lasts--and make sure you have a safety net if, heaven forbid, something bad happens. But what about companies that cannot or don't want to raise that kind of money?

...In the world of business and finance, following fashion is the path to the poorhouse. Avoiding the fashionable location, the fashionable field and, dare I say , fashionable employees, may be the best way to survive a bubble.

Investment Banking Terms

2015-09-21T22:56:00.001-07:00

Extracts from Mukund Mohan's post titled "What to negotiate on your investment banking advisory engagement letter":

Most bankers typically charge between 2% (highly unlikely, but possible if you are a hot company, with a high probability of sale at a large price) to 7% (smaller transaction, < $5 Million).

...Term of the agreement: Since most M&A transactions take 3-6 months, these agreements will last at least for that duration. Most agreements also specify that if your company gets sold for 6-12 months after the start of the engagement, the investment bank will likely get a portion of the sale, even if they did not make the introduction or help negotiate the final sale. While many will claim it is standard to have a 12 month clause, there is no “standard” – it is all negotiable.

The engagement fee or retainer: To help prepare your documents, pitch deck and start to position your company, the company will ask for a retainer fee between 10% and 20% of the expected final sale price (or about $25K to $100K) – whichever is lower. This fee is purely for them putting the time and energy to get your documents together and is independent of whether they final sale happens. If your company is “hot” many will waive this fee. If you are looking to sell, expect to pay this amount – 50% before they start and 50% after 3 months of the final completion of the agreement whichever is earlier.

...Other considerations. If the buyer directly does not approach you, then in a lot of cases, you will find them to want some protection clauses, such as 3 year commitment for the founders to stay at the company etc. To ensure this happens, they will have an “earn out” amount associated with the sale. That is usually counted as part of the acquisition price, but is paid over time. An investment banker, typically will not have the patience to wait for that period of time or control over the longer term outcome, so they will want their “fee” to be paid in full for the net amount. That’ s something you can negotiate as well.

When Bootstrapping Goes Out of Fashion

2015-09-01T21:26:00.001-07:00

Source: NextBigWhat. Also read the related post on Bootstrapping by Ashish of NBW

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

Why a VC Pitch Should be like a James Bond Movie

2015-07-29T03:21:00.003-07:00

From a blog post by Aaref Hilaly of Sequoia Capital titled "How to Present to Investors":

Everyone who watches Bond loves the opening sequence, before the titles come on. There’s suspense, action, and unbelievable stunts – in essence, those first 5 minutes bring home why you love Bond, and that keeps you going through the next 2 hours of nonsensical plot twists.

In the same way, you need to convey the main reasons why an investor should love your business in the first 5 minutes. We found the best way to do that is to open with 3 slides:

1.What’s changed? Explain what’s the discontinuous shift, break-through, or innovation that opens the window to create a substantial new company.

2.What you do: A one-sentence explanation of what your company provides to capitalize on that big change. It still surprises me how often we can get 20 minutes into a meeting without a clear picture of exactly what a company does.

3.Fast facts: Lay out the key metrics for your business: when were you founded? How many employees? What stage of development / market traction? What are you looking to raise? This helps the investor put the rest of the presentation in context.

Related: Another post on the Sequoia blog titled Writing a Business Plan.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

A Day In The Life of An "Aam Entrepreneur"

2015-05-08T07:10:00.000-07:00

From an article in Economic Times by Anuvab Pal:

Judging all Indian businessmen by the top 15 billionaires is like judging every website as if it were Facebook. The bulk of India’s businessmen and entrepreneurs are people you’ve never heard of, are not politically connected, and no one puts them on any magazine cover. They struggle daily just to keep their enterprise open, make about the same as a middle-class employee of a corporation, and often fail. After bank loans, overheads, legal costs and employee salaries, they are often more common than the common man protesting outside his or her office.

Doing business in India is insane. Ask any entrepreneur and they’ll tell you it’s like fighting a small war every day. And that’s just to manage things nothing to do with the business: flip-flopping regulations, needling competitors, litigations, some infrastructure collapse. And then, at some point in the day, maybe the evening, they get to the actual business with its own crises: absent employees, irate customers, some online review with false accusations, stolen money, stolen inventory.

...A small businessman who runs three restaurants explained to me, “Forget a Swiss bank account. I can’t even open an HDFC Bank account. I don’t know who the media thinks we are when they say businessmen are making millions and looting the country. Just today, I had to pay three bribes, solve three internal fights, two cooks resigned, deal with a Neft issue that blocked delivery from our supplier. And it’s just 7:00 am.”

Declaration of Independents: A New Venture Funding Model Without the Exit Pressure

2015-04-25T05:48:00.000-07:00

Indie.vc is a new experiment (in the US) that provides equity like capital to founders in return for cash distributions from profits instead of needing to sell out or taking their company public.

The philosophy:

There’s a mythology that entrepreneurs need to take VC money to hit the big time. While it’s true that some companies really do need outside capital, there are many examples of great companies that have reached revenues of hundreds of millions of dollars, or even gone public, without ever taking in capital, or taking it in only at a late stage, when they’d already created a high valuation by bootstrapping the company.

...Like cement, the cultural foundation for new projects and companies sets early. Those who focus on raising outside capital and achieving fundable milestones have a very difficult time getting off that VC treadmill. Those who focus on creating value for customers and generating positive cash flow from the very beginning are able to make their own decisions independent of competing outside interests.

Can companies today who plan to stay independent and bootstrap their business be competitive in a world awash with Silicon Valley startups and Sand Hill Road cash? Can we build a new kind of startup community that values independence and a DIY work ethic?

The Methodology:

Traditionally, technology investors only get their money out when you sell out (another term for this is a “Liquidity Event”). An investment from IdVC doesn’t preclude you from selling, but in the event you stay independent, our investment will get paid out as distributions from cashflow over time.

...Initially, we will get 80% of those distributions while the founders take 20% until our initial investment has been returned 2x. At 2x the model flips to 80% to founders, 20% to inde.vc until we’ve received 5x our investment. Distributions to indie.vc are capped at 5x.

Only if and when you choose to raise more money from traditional investors or sell out do we become shareholders in your company.

More detailed summary of the terms are spelt out here. A model for how the cash distribution will work is here.

More about the "Declaration of Independents" by Bryce Robeters here.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

Under Promising & Over delivering is for Amateurs?!

2015-03-02T21:43:00.000-08:00

Clearly, our entrepreneurial ethos and role models are going through a massive generation change. The quotes from Infosys founder N.R. Narayana Murthy that entrepreneurs in the 1990s took to heart included:

``Under promise and over deliver. Investors respect this.'' (On why Infosys gets the kind of valuations it does)

"Revenue is vanity; profit is sanity; cash is reality"

and

"PSPD: Predictable, Sustainable, Profitable and De-risked"

Cut to 2015. Mukund Mohan, Head of Microsoft Ventures, writes:

Amateurs under promise and over deliver. They are the ones I hear always complain about valuations. They fail to realize that the “professional” entrepreneur friend they have is growing at an insane rate, but they choose to only compare “valuations” and dilution.

And what do the "Professionals" do to make "investors chase them"?

Professionals over commit and outperform. They are the ones that get the best valuations and are diluting very little. They push their entire team to crush already high expectations. They dont heed the “research” that says that it does not pay to over deliver. They crush their metrics on all accounts and deliver growth that’s off the charts.

The times are indeed changing. What do you make of this?

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

The Science and Art of Finding a Co-Founder

2015-01-18T22:58:00.001-08:00

Extract from INSEAD Prof. Vissa Bala's article in the Economic Times:

While complementary skills and social capital matter, it is good to remind ourselves that the entrepreneurial journey is fraught with uncertainty. When times are tough and there is no light at the end of the tunnel, the founding teams that persist and press on regardless are the ones with shared values. So it is critical that your co-founders are as passionate as you are about the opportunity or dream that you are pursuing; that your co-founders share with you the same convictions about what your venture stands for and how you build it.

...Shared values make it much more likely that the founding team builds chemistry and trust; these elusive qualities are essential so the team can handle the pressure cooker environment of a start-up. You have to ask yourself: Can I survive being in the same room together with this person for 72 hours at a stretch to handle a crisis, without biting his or her head off? Because if there is one thing we know for sure about building a growth venture, a crisis that will require long hours at work may be lurking around the corner, just when you least expect it.

...Given that it is difficult to find a co-founder who is a perfect match on every criterion, it is often better to run with a 'good enough' match and execute a founders' agreement or a shareholders' agreement to govern the principles of the relationship.

Why Indian Companies Are Smart to be "Short-Sighted" and "Risk Averse"

2014-11-07T00:23:00.000-08:00

Extracts from the brilliant article by Dr. Ajay Shah:

Let us start with short-sightedness. The best firms in India are able to borrow five--year money at around 13%. At 13%, a rupee five years from now is worth 54 paisa today. A rupee ten years out is worth 29 paisa today, and a rupee twenty years out is worth 9 paisa today. In contrast, a rupee next year is worth 88 paisa today. With this kind of discounting, it is not surprising that projects that yield returns next year (i.e. 88 paisa today for each rupee of profit) are very attractive when compared with projects that yield returns 10 years from now (i.e. 29 paisa today for each rupee of profit). This difference -- between 88 and 29 paisa -- is striking. In a world with high interest rates, being short-sighted is rational.

...What about risk, and the willingness to undertake risky projects? Modern finance teaches us that when firms are able to issue equity into liquid and efficient capital markets, the risk premium that they face is driven by the `beta' of the company's stock against the index. The long run historical rate of return on Nifty is around 21%: this is also the long run historical cost of capital that the typical firm faces. A firm that has a beta of 1 against Nifty has to plan on giving a return to shareholders of around 20%. If the future is discounted at the rate of 20% per year, it makes sense to look for cashflows in one or two years. It also makes sense to look for less risky (i.e. low beta) projects. In a world with a high cost of capital, short-sightedness and a lack of venturesomeness are rational outcomes.

...If you believe that this economic reasoning explains the bulk of the short-sightedness that afflicts India's firms and managers, then there is an extremely optimistic implication: it is not very difficult to change this behaviour. If we make a transition into an environment with low inflation, low interest rates, and low risk premia, then that would give us a whole new breed of risk-taking, far-sighted firms and managers. The management gurus would even write books about the new generation of Indian managers who have developed a `new culture' of doing risky, far-sighted projects.

Dr. Shah also highlights how the solution to this "cultural problem" we Indian entrepreneurs have can be achieved through through a combination of financial sector reforms, pension reforms, fiscal strengthening and capital account convertibility.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.